“Does Health Insurance Drive Economic Growth?” joint with Shanna Pearson-Merkowitz and Irwin Morris (forthcoming at Politics and Policy)
While there is a clear relationship between better health and better economic outcomes, the effects of increasing health insurance on the economy remain understudied. We employ two datasets, one on health insurance coverage in the contiguous 48 U.S. states and one for countries in the OECD, to model the effect of expanding health insurance on state and country economic and employment growth over the last two decades. We find that increased health insurance coverage of the working age population, especially through government programs like Medicaid, is associated with faster GDP and employment growth. However, we also find that these results may be contingent on controlling the per-enrollee cost of these programs. These findings are informative for future health insurance reforms both federally and in the U.S. States
“The Minimum Wage, Bargaining Power, and the Top Income Share” (pre-published online at Forum for Social Economics)
Much of the argument in support of the minimum wage is its ability to lift workers out of poverty. But the minimum wage also has the potential to influence the relative bargaining power between (non-union) workers and firms and historically this was one of its main purposes. In this paper we review how the minimum wage can improve workers’ bargaining position. We use a state-level panel data set that exploits differences in the minimum wage at the state level to show that higher minimum wages, along with unionization rates and higher top marginal tax rates, are successful in reducing overall income inequality, mainly by reducing the share of income going to the top 1 percent of the income distribution.
“Going Positive: The effects of negative and positive advertising on candidate success” joint with Shanna Pearson-Merkowitz. Research and Politics
Given the depth of research on negative advertising in campaigns, scholars have wondered why candidates continue to attack their opponents. We build on this research by considering real-world campaign contexts in which candidates are working in competition with each other and have to react to the decisions of the opposing campaign. Our results suggest that it is never efficacious for candidates to run attack ads, but running positive ads can increase a candidate’s margin of victory. These results are conditioned by two factors: candidates must both stay positive and out-advertise their opponent. Second, the effects of positive advertising are strongest in areas where the candidate is losing or winning by a large margin—areas where they might be tempted to not advertise at all.
“Do Lower Top Marginal Tax Rates Slow the Income Growth of Workers?” Labour
Top marginal tax rates are positively correlated with the pretax income growth of the bottom 90 per cent — those who are not subject to the top rates. To explain this correlation, this paper presents and tests a model in which executives can increase firm profitability by (i) increasing the firm’s level of technology and (ii) decreasing labor costs. In the model, higher marginal tax rates may reduce pretax inequality by increasing the average income growth of workers. This hypothesis is tested by examining the effect of top marginal tax rates on (unobserved) relative bargaining power between labor and firms and, therefore, on the income growth of workers in the USA. Bargaining power, in both the theoretical and the empirical models, is proxied by private-sector unionization and use of offshore labor resulting in higher imports.
“Loss aversion, education, and intergenerational mobility”
Abstract: Recent estimates of the intergenerational elasticity of income in the United States range between 0.45 and 0.6. Existing empirical work looking at the effects of parental income on IQ, schooling, wealth, race, and personality is only able to explain about half of this elasticity. This paper provides a possible behavioral explanation for this elasticity in which heterogeneous agents in sequential generations are loss averse and must choose their education level after learning their ‘earning ability’ and inheriting a reference level of consumption and bequest from the previous generation. These borrowing-constrained agents make education investment choices in part to avoid losses relative to reference consumption in the first and second periods of their lives rather than to maximize lifetime resources. Agents with high inherited reference consumption choose high levels of education in order to avoid losses in the second period and are therefore likely to have high income and consumption themselves. Those with very low reference consumption invest in more education than those in the middle of the reference consumption distribution, as the opportunity cost of forgone earnings during schooling is less likely to cause them to experience a loss in the first period. The model generates a positive intergenerational income elasticity even when there are functioning capital markets to finance education investments. I find modest empirical support for the J-shape education decision rule generated by the model and show that it is mostly successful in matching the asymmetric intergenerational transition rates between income quintiles of white families.
“Campaign Politics and Quasi-Informative Advertising”
Abstract: This paper presents a model in which voters are not completely rational in forming expectations of a candidate’s quality. Specifically, a voter believes that a candidate is more qualified when exposed to more positive campaign advertisements and less qualified when exposed to more negative advertisements. The main implications of the symmetric model are that as voters’ quality perceptions of the candidates increase, voter turnout increases and candidates move their policy positions toward the center. This result increases as the number of positive advertisements increase and decreases as negative advertisements increase. This result is initially tested using the number and type of advertisements aired in the 1996 U.S. presidential election finding more support for the effect of advertising on which candidate voters support than on whether or not voters turn out.
“Loss Aversion, Low Aspirations, and the Persistent Black-White Education and Income Gaps”
“Inequality, Innovation, and Increasing Returns”
“Creative Destruction with Differentiated Products”
“Should Sanders go negative on Clinton? Social science says no.” joint with Shanna Pearson-Merkowitz, The Monkey Cage, Washington Post, January 30, 2016
“Intergenerational Mobility” in The American Middle Class: An Economic Encyclopedia of Progress and Poverty, ed. Robert Rycroft, forthcoming
“The Economic Impact of Expanding Medicaid” with Shanna Pearson-Merkowitz, The Collaborative, March 2015
“It’s Time for a New Partnership Between Labor and Management” with John Case, HBR Online, June 23, 2014
“Want Less Inequality? Tax It” with John Case, American Prospect, Nov-Dec. 2012